Access to Capital: Farm Credit

In previous weeks, the Beginning Farm Forum’s has presented several ways that beginning farmers and ranchers can access capital, including the Farm Service Agency and crowdfunding. Today, we’re examining Farm Credit, a national organization made up of over 70, member-owned cooperative associations that provide financial services to farmers, ranchers and rural business across the U.S.

Farm Credit was founded in 1916 when President Woodrow Wilson signed the Federal Farm Loan Act into law, which established a federal farm loan board, twelve regional farm loan banks, and dozens of regional farm loan associations. The visionary concept of this legislation was cooperative credit systems, which at the time was seen as an audacious approach. But farmers wanted more financial autonomy. The Farm Credit Administration, which regulates Farm Credit, had been part of the U.S. Department of Agriculture until 1953, when President Dwight Eisenhower privatized the agency with the intention of maintaining farmer ownership and patronage dividends. The cooperatives eventually bought back the government capital between 1940s and 1960s, achieving full borrower ownership. This marked a rare example of a federal government start-up investment repaid – in full, with interest – by the owners of that cooperative.

Today, Farm Credit loans billions of dollars each year to nearly 500,000 borrowers, more than 50% of whom are small producers borrowing under $50,000. Additionally, many Farm Credit cooperatives provide loans based on credit scorecards, which make it easier for farmers with unreliable financial statements access credit. Loan officers act more like a financial coach for farmers, offering capital access advice and aiding them with long term financial management plans. They want to know more detail about farm businesses and how they work, so they can best help each operation with its unique needs.